Price Action Traders
- Thread starter bearmountain
- Start date
I read the book (not all of it either) between July and December last year and took what I liked out of it. I don't remember all the details in it. It was waaay too much information for me. I distilled what worked really well out of it and I'm consistently profitable as a result.
As for any bar being a potential setup bar, it actually is. Doesn't mean every bar is a high probability setup bar. But I'm looking at a 5-min chart of crude oil (CL) right now and this very minute I see a green bar in a consolidation range on low volume above a flat 20-bar MA in a strong previous uptrend, so here is a long setup. Do I think it's high probability? No. I prefer to play a break out of the narrow range consolidation, letting price take me with it. But is it a setup one direction or the other. Sure.
Quote from NoDoji:
I don't have a price action thread.
For swing trading, read Alan Farley's "The Master Swing Trader". If you read a little bit of Al Brooks' first, Farley will seem like a much easier read.
Sorry, I have confused names. But you might still be able to help. The thread was " ............ (name) tries to understand elusive price action "
Thanks
My take from reading Al Brooks work is that timeframe is important, 5 min seem to be his minimum for intraday trading (he will refer to 3 min chart once in a while, but 5min seems to be his standard). So a 5 min chart cuts out a lot of noise which is present in much faster/lower time frame charts.
I don't believe he says that there is meaning in every bar of a lets say 1 min chart or a 1000 volume bar ES chart etc. What are your thoughts?
PS. I use to think that time based charts like 5 min are my grandfathers charts and volume charts are much superior to time based. I believe brooks has carefully looked at volume charts, even back in 2007 he says volume charts are a more accurate representation of market action, but I believe there is something inherent in a 5 min chart that support his methodology?
I emailed Mr. Brooks a couple years ago about volume bar charting and I can tell you from his response that he doesn't have solid grasp of their advantages.
Let me give you a few examples.
How much action would you expect to see in a 5 minute bar chart on a slow volume Friday in the Summer before a Holiday?
Answer - not much or at least choppiness and a lot of noisy oscillations.
How much action would you expect to see in a 5 minute bar chart on a typical high volume Tuesday during earnings season?
Answer - should be pretty decent but wide range oscillations.
How much action would you expect to see in a 5 minute bar chart immediately following major news reports?
Answer - Untradeable large spikes
Now consider the same situations using Constant Volume Charting:
How much action would you expect to see in a slow intraday constant volume bar chart on a slow volume Friday in the Summer before a Holiday?
Answer - Slow consistently methodical oscillations
How much action would you expect to see in a fast intraday constant volume bar chart on a slow volume Friday in the Summer before a Holiday?
Answer - fast consistently methodical oscillations
How much action would you expect to see in a slow intraday constant volume bar chart on a typical high volume Tuesday during earnings season?
Answer - Slow consistently methodical oscillations
How much action would you expect to see in a slow intraday constant volume bar chart immediately following major news reports?
Answer - fast consistently methodical oscillations
The key is that constant volume bar charting will always give you consistently methodical oscillations regardless of the liquidity in the market. These charts are the ultimate in smoothing out your decision process regardless of your own personal system triggers.
Here is an example and what I'm talking about. This is a 16807 CVB chart of the ES over the last 3 days. Tuesday and today, with clearly strong up momentum, we get two nice triggers long with nice profits. Wednesday when we had a pull back in that clear strong upward momentum, we were protected by an early exit protecting profit.
(Remember these buy, sell and exit labels are computer generated in real time)
(Remember these buy, sell and exit labels are computer generated in real time)